Suppose Two Firms, FastNet and SmartCast Are the Only Fast

question 230

Multiple Choice

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally.
-In the scenario above, in Nash equilibrium:

• A) Both firms cheat to produce more than the agreed amount.
• B) Both firms comply with the agreement.
• C) One firm complies with the agreement while the other cheats to produce more than the agreed amount.
• D) Both firms cheat to produce less than the agreed amount.

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Definitions:

Kwashiorkor

A potentially fatal form of malnutrition in which the diet is extremely low in protein.

Independence

The state or quality of being self-reliant and free from external control or support.

On Demand

A service or system that provides goods, services, or media available to consumers as soon as they request it, often via digital means.

Physiological Impact

The effect or change on the physical and biological functions of a body as a result of various factors, including stress, environment, or disease.